Adviser demand central to new ETF launches

Two fund managers have unpacked why financial advisers are essential to their debut in the exchange-traded fund (ETF) space.

The Australian ETF industry has seen an array of new players entering for the first time in recent months, including Sydney-based boutique fund managers GCQ Funds Management and Lakehouse Capital.

In early March, GCQ – which stands for global, concentrated and quality – listed its GCQ Global Equities Complex ETF (GCQF) on the ASX, replicating the investment strategy and performance of its GCQ Flagship Fund.

In the subsequent month, Lakehouse Capital launched its Global Growth Fund on the ASX in an ETF structure, titled the Lakehouse Global Growth Fund Active ETF (LHGG).

These launches follow estimates projecting the local ETF sector to surpass $300 billion in funds under management by the end of the year, according to State Street. Amid this rapid growth, financial advisers are planning to increase allocations to ETFs by more than 33 per cent during the next year.

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The Australian adviser market and its heightened interest in ETF products was a key reason for GCQ’s ETF launch, said the firm’s head of distribution, Stephen Higgins.

“Our decision to launch an ETF followed a steady increase in inbound inquiry from advisers and stockbrokers over the last 12 months urging us to go down this path,” Higgins said in a conversation with Money Management.

“Many of these advisers use the CHESS platform exclusively and weren’t previously able to invest in the GCQ Flagship Fund. GCQ’s strong returns, coupled with a strategy that resonates with investors, underpinned the interest advisers expressed in accessing our global strategy through an ETF.”

Over at Lakehouse Capital, portfolio manager Nick Thomson said debuting its inaugural ETF vehicle was critical to widening investor access through an ASX-listed offering.

“We’d observed the rapid adoption and growth in ETFs over recent years, and for some time saw it as part of our future at Lakehouse to broaden investor access and reduce administrative complexity,” the portfolio manager detailed.

“Given our global fund was available on mFunds, the looming closure of mFunds was a catalyst to launch LHGG on the ASX. Additionally, the change in ownership in late 2024, when Lakehouse became a majority-staff-owned business, meant it was clear to make this long-term investment.”

While Lakehouse is currently working with several advisers and family offices to distribute its ETF, Thomson said the boutique fund manager is looking to improve its efforts in this area moving forward.

He continued: “The short answer is we’re flying under the radar. We do have numerous financial planners and family offices that invest with us, but since we don’t have a distribution team there’s more for us to do in that space in the years ahead.”

GCQ’s Higgins also said launching an ETF solution will enable the company to reach a broader pool of advisers and brokers. To do so, it hired two distribution directors in its ranks.

“Over the last three years we have dedicated a lot of time to meeting with advisers, educating them on our investment strategy. The only thing that’s changed with the ETF is that we now have a bigger universe of advisers and brokers to talk to,” the head of distribution said.

“Recognising that we have more ground to cover, we have added two distribution directors to our team in the early months of 2025.”

ASX-listing an ‘obvious choice’

Another important consideration for first-time ETF launches is which exchange to list on: the dominant ASX, or rising competitor Cboe.

Both GCQF and LHGG are ASX-listed products. For Thomson, the ASX’s longer history and greater familiarity among its clients was central to its decision.

“Both exchanges have great offerings, but ultimately the ASX has a longer history, more established brand, the deepest and most liquid market, and a level of familiarity with our investor audience we felt they’d never question the decision,” he said.

Similarly for GCQ, choosing between the two Australian exchanges was “relatively easy”, noted its chief operating officer, Kathy Wu.

“We reviewed market share data that showed ASX ETFs represent around 97 per cent of all Australian ETFs by market capitalisation, and I had also received anecdotal feedback that some broker platforms still aren’t compatible with Cboe. We wanted to launch an ETF with mainstream appeal, so ASX was the obvious choice,” Wu said to Money Management.